When Does a Margin Call Start?
A margin call is triggered when the value of your collateral falls below a certain threshold compared to your loan balance. This is an essential mechanism designed to mitigate risks and ensure that the loan remains adequately secured.
A margin call begins when the value of your collateral becomes less than 120% of your current loan balance.
Example Calculation
- Loan Balance: €100,000
- Margin Call Threshold:
100,000+(100,000×0.2)=120,000 EUR100,000 + (100,000 \times 0.2) = 120,000 \, \text{EUR}100,000+(100,000×0.2)=120,000EUR
If the collateral value drops below €120,000, the loan will enter a margin call.
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